Interim Report - TEEB

Box 4.2: Subsidies that distort trade
Trade policies influence global trends in biodiversity.
Provisions for trade in agriculture and fisheries
(e.g. favourable treatments or preferential tariffs) can
have a significant effect on land and resource-use
patterns across exporting and importing countries.
International trade agreements, combined with
export-oriented national policies, can cause countries
to focus on exporting natural resources at an
unsustainable level. For example, the EU Fishing
Agreements have led to exhaustion of resources by
EU vessels outside the EU, leading to unsustainable
use of natural resources in these countries.
André Künzelmann/UFZ
support to rebuild devastated European agriculture after
World War II. Many are permanent features – agricultural
inputs and products are often subsidized directly, along with
energy, food, transport and water.
Less obvious subsidies exist as accidental features of
policies or lack of policies which means that the costs of
damage to biodiversity and ecosystems are ignored. For
example, water abstracted is rarely priced at its resource
value, companies rarely pay for the value of genetic materials
they build products on, and the cost of damage to forest or
coastal areas is not generally paid for.
This has already begun to change. Although existing
subsidies are well defended by vested interests, policy
makers have recognized the importance of reforming them
for environmental and economic reasons. Two avenues have
proved to be promising. Subsidies can either be removed or
reformed to promote environmentally friendly resource use –
such as the changes to the agricultural subsidies in the
United States of America and the European Union. Subsidies
can be replaced, using private resources to sustain financial
flows for certain land-use practices, as in the example of
landscape auction in the Netherlands. Landscapes are
broken down into distinct elements such as a tree, a
hedgerow or a pond. While the landowner still owns the item,
people bid at auction to support the conservation of a
specific element and thereby raise money for its preservation.
Thus both farmers’ incomes and the conservation of biodiversity
can be assured without state subsidies.
REWARDING UNRECOGNIZED BENEFITS,
PENALIZING UNCAPTURED COSTS
Getting prices right is a cardinal rule for good economics.
Since most biodiversity and ecosystem benefits are in fact
public goods that have no price, this can be done in two
ways: instituting appropriate policies (which reward the
preservation of the flow of these public goods and penalize
their destruction), and encouraging appropriate markets
(mainly “compliance markets” which attach tradable private
values to the supply or use of these goods and create
incentive structures to pay for them). We highlight the
example of payments for ecosystem services, and some
nascent markets which could harness the power of supply
and demand if appropriate infrastructure, incentives, financing
and governance are provided.
PAYMENTS FOR ECOSYSTEM SERVICES
Payments for ecosystem services (PES) can create
demand, a necessary market force to correct an existing
imbalance which harms biodiversity and stymies sustainable
development.
PES are payments for a service or the land use likely to
secure that service (UNEP/IUCN 2007). Governments
are increasingly creating incentive programmes that support
landowners who protect ecosystem services by
compensating for lost revenues (Millennium Ecosystem
Assessment 2005). Payments are particularly valuable when
land cannot be purchased and set aside for conservation, or
where protected areas cannot be established.
European Commission – LIFE04 NAT/HU/000118
48 The economics of ecosystems and biodiversity